Case Note & Summary
The dispute arose from a contract for installing a Coal Handling Plant Package for the Nabinagar Thermal Power Project. The employer, Respondents, awarded the contract to a contractor, who collaborated with The appellant to meet technical eligibility criteria. As part of the bid, the collaborator executed a Deed of Joint Undertaking (DJU) with the contractor in favor of the employer, assuming joint and several responsibility for the contract's performance. The main contract between the employer and contractor contained an arbitration clause. Subsequently, the contractor faced liquidation and was ordered to be liquidated on 16.01.2020. The employer then called upon the collaborator to fulfil its obligations under the DJU. A tripartite agreement was entered into in 2016 to ensure direct payments to the collaborator. When disputes arose, the collaborator issued a notice under Section 21 of the Arbitration and Conciliation Act, 1996, seeking consent to refer the matter to arbitration. The employer refused, citing no privity of contract. The collaborator filed a petition under Section 11(6) before the High Court, which was rejected. The Supreme Court allowed the appeal, holding that the DJU made the collaborator an inextricable part of the contract with joint and several liability. The employer's subsequent communications and the tripartite agreement reaffirmed the collaborator's obligations. The Court set aside the High Court's order and appointed a sole arbitrator to adjudicate the disputes.
Headnote
A) Arbitration Law - Non-Signatory to Arbitration Agreement - Section 11(6) of the Arbitration and Conciliation Act, 1996 - Collaborator's right to invoke arbitration - The collaborator, though not a signatory to the main contract, executed a Deed of Joint Undertaking (DJU) as part of the bid, making it an inextricable part of the contract with joint and several liability. The employer later called upon the collaborator to fulfil obligations under the DJU. Held that the collaborator is a veritable party to the contract and entitled to invoke the arbitration clause (Paras 7-11). B) Arbitration Law - Appointment of Arbitrator - Section 11(6) of the Arbitration and Conciliation Act, 1996 - High Court's rejection set aside - The High Court erred in rejecting the Section 11(6) petition on the ground of no privity of contract, ignoring the DJU and subsequent communications that established the collaborator's integral role. Held that the collaborator is entitled to arbitration (Paras 11-12).
Issue of Consideration
Whether a collaborator, who is a non-signatory to the main contract but executed a Deed of Joint Undertaking (DJU) as part of the bid, is entitled to invoke the arbitration clause in the main contract against the employer.
Final Decision
Appeal allowed. High Court judgment set aside. Petition under Section 11(6) allowed. Justice (Retd.) Chakradhari Sharan Singh appointed as sole arbitrator. Arbitrator to proceed in accordance with law and make declaration under Section 12 within 15 days. Registry to inform the arbitrator.
Law Points
- Non-signatory can invoke arbitration if veritable party to arbitration agreement
- Joint and several liability under Deed of Joint Undertaking makes collaborator inextricable part of contract
- Tripartite agreement does not eclipse original contract but reaffirms obligations
